March 14 (Bloomberg) -- Brazil’s swap rates dropped the
most in three months after central bank minutes indicated that
an increase in the target lending rate isn’t imminent.

Swap rates due in January 2014 fell 12 basis points, or
0.12 percentage point, to 7.84 percent today in Sao Paulo for
the biggest decline since Dec. 6. The real was little changed at
1.9717 per U.S. dollar, snapping a three-day losing streak.

The central bank said in minutes of last week’s meeting,
published today, that “a cautious management of monetary
policy” is needed. Policy makers held the target lending rate
at a record low 7.25 percent on March 6 and eliminated a pledge
made in October to leave borrowing costs unchanged for a
“prolonged” period.

“Mentioning that monetary policy should be administered
with caution is a clear message that there won’t be a rate hike
in the short term,” Paulo Petrassi, managing partner at Leme
Investimentos in Sao Paulo, said in a phone interview. “It
removes the possibility of a rate increase in April.”

Economists cut their 2014 growth forecasts in a survey
published this week. Gross domestic product will expand 3.50
percent next year, according to the median estimate of about 100
analysts surveyed by the central bank, down from the prior
projection of 3.65 percent.

Brazil’s retail sales including autos, auto parts and
construction materials rose 7.1 percent in January from a year
earlier, less than the 8 percent median forecast of 18
economists surveyed by Bloomberg.

Real Trading

The real reached a 10-month high of 1.9442 on March 8
before the central bank sold $1 billion of reverse foreign-exchange swaps on March 11 to weaken the currency.

The central bank has swung between selling currency swaps
to prevent the real from falling too quickly and offering
reverse currency swaps to protect exporters by preventing
excessive gains.

Brazil pushed the real down 9 percent in 2012 and 11
percent in the prior year as Finance Minister Guido Mantega said
developed economies were debasing currencies such as the dollar
while driving up those of emerging nations.